What is Source Direct?

According to the manual (Installation / Setting Up the Player - Easy Setup Wizard / Select the Best Output Resolution), the Source Direct resolution setting is for use with external video processors or high-end TVs.
When the resolution is set to Source Direct, the player acts as a transport, outputing the original resolution of the disc content with minimal additional processing.
The manual (Installation / Setting Up the Player - Easy Setup Wizard / Select the Best Output Resolution) has a table of resolutions for various content types.
Some ABT VRS processing is bypassed when using Source Direct. When set to Source Direct the player does:

Note that your display must be capable of receiving a 1080p24 signal, or you will get no video when playing Blu-ray with Source Direct.
Similarly, the display must accept 480i or 576i over HDMI or you will get no video when playing DVD with Source Direct.

What is the difference between Blu-ray 1080p24 and Source Direct?

What is the difference between DVD 480i and Source Direct?

Some ABT VRS processing is bypassed when using Source Direct. Some of the video settings and the player's aspect ratio controls are not used, so Wide/Auto will not pillarbox 4:3 material. See What is Source Direct?

Why are 4:3 DVDs not pillarboxed with Source Direct?

Because that function of ABT VRS processing is bypassed when using Source Direct. Use one of the other resolutions if you want the player to pillarbox 4:3 DVD titles with the 16:9 Wide/Auto setting.